Business Plan Assignment Sample 4: Coffee Shop

Coffee Shop Business Plan Assignment Sample

Name

Institution

 

Abstract

Java Coffee House has a unique concept, which includes serving specialty coffee and other accompaniments in an ambient and warm atmosphere, and pricing the products competitively. An analysis of the coffee industry in the United States reveals that the sale of specialty coffee has been growing at by 20% during the last 10 years. Moreover, the target market for the coffee shop is young professionals and students. Some of the main competitors include the national chains, and local coffee shops, which include Linden and Coffee to Go. The marketing plan for the coffee shop includes identifying a SWOT analysis of the company and the marketing strategies that to be employed. The financial plan shows that the required capital is $250,000, and the break-even point will be in five years. Moreover, the management team comprises of highly competent and experienced individuals. Therefore, based on the concept, it is highly probable that the business will succeed, which will lead to the opening of additional coffee shops in other locations.

Table of Contents

Executive Summary. 

The Industry and Its Products or Services. 

The Coffee Industry. 

Position in the Industry. 

The Competition. 

The Marketing Plan. 

Java Coffee House – The Idea. 

Objective. 

Industry Analysis.

Market Segmentation.

4 Ps of Marketing.

SWOT Analysis.

The Financial Plan. 

The Management/Leadership Team.

Outsourced Services.

Management Team.

Conclusion.

 

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Executive Summary

            The coffee industry has been experiencing unprecedented growth in the recent past. Java Coffee House plans to position itself as one of the leading coffee shops within the local area. The coffee shop will start with one location, but as operations expand, additional outlets will be opened. The coffee shop will be positioned strategically to ensure that it attracts the target consumer group.

            Java Coffee House plans to attract customers by providing an ambient environment characterized by quality food, high quality services, and good food at a reasonable price. Furthermore, the coffee outlets will offer a variety of products to ensure that the needs of each customer are addressed. Some of the products offered will include coffee, tea, juice, sofa, and other non-alcoholic drinks. At the same time, the Java Coffee House will also offer breakfast, lunch, and dinner, to ensure that the customers can get all their requirements met at one location.

            The outlets interior design is one of the elements that will reflect the coffee shops mission and vision. It will project a relaxed atmosphere. Furthermore, to ensure that the outlet caters to the diverse needs of different consumers, it will have two sections, one only having tables and chairs, and another one having antique stuffed chairs and coaches, book shelves that will be filled with reading materials, coffee tables, branded lags, as well as tiffany style lamps. Addition, the shop will have two different music systems to cater to the customers in each of the rooms.

The tentative budget for establishing the outlet will be $250,000. The business will operate as a sole proprietorship to ensure that the sole proprietor has autonomy over all the decisions that are made (Khan, 2017). However, funding will be partially provided by silent investors, who will have a repayment of their investment within a period of five years. Other sources of capital will include personal savings and support by friends and family members. It us expected the coffee shop would break even by the fifth year of operation (Sherman, 2015).

The target consumers for the restaurant include people aged 16 and 38 years. This target group is likely to comprise of students or young professionals who may have the incomes necessary to buy the products offered at the outlet. Furthermore, to ensure that the coffee house attracts customers, advertising and promotion will be done using multiple avenues. One of these is the distribution of fliers within the neighborhood. Other methods will include advertisements through the local media houses, including local websites (Treyger, 2019). Additionally, the social media will be used as part of the advertising strategy. One of the advantages of using social media is the ability to target an advertisement to a particular audience or demographic, thus it will be an important tool for advertising (Tuten & Solomon, 2017). Furthermore, the coffee shop will also offer branded materials, including calendars and t-shirts.

            The building will have a substantial place parking space to ensure that the consumers do not struggle when locating a parking spot. Parking space is one of the main elements that consumers examine before deciding to visit a given outlet (Baskerville, 2014). Furthermore, the area is strategic since various buildings that have high traffic surround it. Besides, there are multiple educational institutions surrounding the building, which may provide the much-needed traffic. However, to ensure that the facility’s appearance is representative of the organizations vision and mission statements, remodeling will be needed, which will include installing new flooring and repainting the building.

The Industry and Its Products or Services

The Coffee Industry

Recent industry data reveals that people aged between 18 and 38 tend to highly social and mobile. As such, they prefer having their coffee together with their friends in stylish public places, resulting in increased popularity of stylish, high-end coffee outlets. The data also reveals that the sales of specialty coffee have been increasing by more than 20% each during the last decade (Gaille, 2017). Moreover, the sales of retail coffee exceed $5 billion annually, and Americans consume around 400 million cups of coffee each day. The data shows that the demand for coffee in the United States is increasing rapidly. Moreover, specialty coffee served in exquisite public places has gained immense popularity (Marks, 2019).

Position in the Industry

The target geographic area tends to be an affluent one. Moreover, it has a high population of young professionals and students, thus making it an ideal market for Java Coffee House. People within the target location can afford the products that the coffee shop will offer, including snacks, specialty coffee, and other accompaniments. Market research has shown that an estimated 6 out of 10 people in the area consume a minimum of four coffee cups of coffee each week, which indicates the potential that the market has (Grullon, 2018).

The Competition

The targeted area has three other coffee shops, but none of them offers the same quality of products and the experience that Java Coffee House intends to provide. For instance, two of them lack Wi-Fi; the parking in all three is considerably small, while the design and styling of the interior do not provide an ambient atmosphere.

Business plan assignment for coffee shop
 

The Marketing Plan

Java Coffee House – The Idea

The Java Coffee House will be a unique concept, offering a variety of coffee beverages and a variety of accompaniments and meals. Moreover, it will provide a warm and ambient atmosphere for the clients, which will be one of its selling points.

Objective

To provide a selection of some of the finest coffee beverages and other accompaniments at an affordable price, coupled with an ambient and relaxing atmosphere for the customers to make their experience unique.

Industry Analysis

The coffee industry is expanding and it is characterized by an increasing demand for specialty coffee. The United States is one of the leading markets for coffee in the world (Marks, 2019). Furthermore, growth in the coffee market tends to be in restaurants and coffee shops. Despite the United States market having matured in terms of retail sales and sales revenues, there is a considerable opportunity for specialty coffee and an ambient atmosphere (Tuten & Solomon, 2017). Moreover, Coffee Consumption in the United States has been increasing by 2.5% each year. The retail coffee segment, in particular, has been flourishing during the last decade. Additionally, the local climatic conditions tend to be conducive for the consumption of coffee beverages. At the same time, it is important to note that coffee has become a lifestyle for many of the people in the region, yet the available coffee outlets do not serve their unique requirements. Therefore, the coffee shop will address the unique needs of the customers in the area offering a variety of specialty coffees and other beverages.

Market Trends

            An assessment of the sectors shows that the industry is moving towards customers that are more sophisticated. As such, the industry is responding is responding through various ways, one of the most notable being offering high quality products. Players in the sector are using high quality ingredients in an attempt to win a larger share of the market. Furthermore, ambience and warm environments are gaining more popularity (Grullon, 2018). For instance, young professionals and students tend to seek for an environment where they can socialize with their peers, but at the same time not having to spend too much. 

Market Segmentation

The United States will be the primary geographic target market. The target demographic includes people aged 16 and 38 years, who are likely to be young students, young professionals, shoppers, and tourists. The psychographic target market includes college students seeking for an economical place where they can spend their free time, young professionals seeking for an informal place to socialize and spend their time, and tourists in the area who visit the area. Furthermore, the coffee shop will cater to the needs of individuals who want high quality coffee in an ambient and relaxing atmosphere. Research shows that the targeted customers are discerning and they tend to prefer better tasting coffee. Moreover, the students and young professionals tend to consider coffee shops as convenient studying and meeting locations, whereby they can meet other students or study without having to pay additional charges (Ward, 2017). Therefore, Java Coffee Shop will address the needs of these target customers by providing them with the right environment for meetings and studying.

4 Ps of Marketing

Product – The product offerings will include a variety of coffees, tea, accompaniments, and meals.

Price – The products will be priced competitively to make them affordable to the target market. Besides, the prices of the products offered by competing firms in the region will also be analyzed to develop a competitive price.

Place – The coffee shop will be located strategically at a location that has a high human traffic. Furthermore, customers will have the option of drinking or eating at the coffee shop or getting packaged options.

Promotion – Multiple promotion methods will be employed. These included distribution of fliers in the neighborhood and placing of advertisements in the local media outlets, including on websites.  Furthermore, highly targeted social media advertisements will be part of the advertising strategy. Additionally, the coffee shop will also offer branded materials, including t-shirts, pens, calendars, and caps to increase brand exposure (Gaille, 2017). 

SWOT Analysis

Strengths

An increasing demand for specialty coffee and a large customer based. Another strength is the composition of the management team, which is will be composed of highly qualified individual

Weaknesses

Lack of experience in the region will be one of the weaknesses. Besides, insufficient funding may also reduce the chances of the coffee shop succeeding.

Opportunities

Differentiating the product offerings to make them unique relative to those of the competitors is one of the opportunities. Besides, the target market tends to be diverse enough. Another opportunity is pricing the products competitively to capture customers from some of the other restaurants in the area.

Threats

One of the main threats is the presence of local coffee shops in the area that offer specialty coffee. Another threat is competition from multinational players such as McDonalds and Starbucks since they hold a considerable share of the coffee market (Marks, 2019). Besides, the coffee culture may be relatively new in the area, thus it may take some time before the coffee shop gains popularity among the consumers in the area.

Keys to Success

  • Excellent customer service
  • Affordable pricing
  • A variety of high quality products
  • An ambient and warm environment
  • Superior marketing to attract customers who will become loyal customers to the coffee shop

The Financial Plan

Java Coffee House will be expects to raise $250,000 from various sources. This is the required initial capital for it to launch its services. Raising the capital will raise the coffee outlets financial goals exponentially, and it will enable it to start generating revenues. The initial capital will go towards renovating the outlet, procuring the necessary ingredients, recruitment of employees, registration of the company, marketing and advertising activities, as well as other administrative functions.

            Additionally, as soon as the first outlet is established and starts generating revenues, plans will be in place to establish outlets in other locations, and to employ similar strategies as the ones used in the first outlet, but depending on how it performs. Furthermore, the expansion will enable Java Coffee House to generate more revenues to have the relevant resources for expansion purposes. Additionally, as the coffee shop business expands, more employees will be hired, in addition to strategic marketing activities to ensure that it reaches its customer goals as it expands; while at the same time ensuring that the quality of services remains superior. Therefore, to come up with the financial projections, a detailed market analysis, and a consideration of other critical variables is done. An industry analysis and a detailed evaluation of other variables, such as the characteristics of the local market, reveal that the financial goals are the most accurate with respect to the business. Furthermore, it is highly probable that the coffee shop will surpass the projections by the third year of operation. Nonetheless, an analysis of the outcomes will be evaluated, and the projections recalculated each quarter.

 

business plan financial projections

            Based on the above table, the projections reveal that within the first year, the coffee shop will have an estimated 36,000 customers. This translates to around 3,000 customers during the first month, and around 100 customers per day. Accordingly, the revenues for the first year of operation will be an estimated 216,000 based on the assumption that the average order per customer will be $6. Marks (2019) states that the average customer spends around $5 in a coffee shop, hence the average revenue per customer is set to $6 by factoring elements such as accompaniments. Furthermore, the average revenue per customer is expected to continue rising with time because of the concept of time value of money as well as other factors that may affect the sector, such as the price of coffee beans. Gaille (2017) for instance, mentions that because of the increasing commodity prices, the average coffee price has risen by an estimated 25% during the last five years.

Financial projection for business plan

Additionally, the number of customers per year is expected to continue rising due to the effect that the extensive marketing and advertising activities will have on the brand. Besides, the expansion program will result in the opening of new outlets, consequently leading to more customers. The increasing number of customers would result to more revenues for the enterprise. At the same time, the operating costs will also have increased because of elements such as increased labor costs, higher administrative costs, and even more sales and marketing activities (Khan, 2017). However, the generated revenues will be sufficient to cover these expenses. Therefore, based on the estimates on the table, it is highly probable that by the third year the coffee shop will have broken even, thus it will start generating profits.

Therefore, it the financial projections indicate that the Java Coffee House will break even by the third year. The profit made during the three years will be sufficient to cover the capital costs. During the first year of business, the outlet will not have many customers. However, they will increase gradually because of the increased marketing and advertising activities. Besides, it is likely that the area will have more traffic, thus increasing the number of potential customers. Based on the financial projections, the business will have generated enough revenue to break-even. Furthermore, due to the ongoing expansion activities, operational costs will be higher. However, such would result in increased revenues, which will make it possible to cover the operational and the expansion costs.

The Management/Leadership Team

Outsourced Services

            The company will initially outsource some professional services including legal ones and IT related tasks. Furthermore, other functions such as the designing of the menu that may also be contracted to local professionals. Some of the leading local chefs in the area will be contracted to ensure that the foods and beverages prepared are in high demand in the region. Additionally, for IT services, it will not be possible to establish an IT department. We will outsource IT related services to a local company. The role of the company will include the installation of all the accounting/ordering software necessary for automating functions at the outlet. Besides, the local firm will also be responsible for maintenance of the computers and other devices with the company, and their charges will be based on the services that they provide.

Management Team

  • The president / Owner will be responsible for the overall operations of the coffee shop. The president will provide the overall direction for the operations of the business and will be the final person to be consulted regarding all the key decisions made by the managers. The president will also work as the point of contact with the investors and will ensure that their interests are well represented in the organization. The president will also have the overall responsibility of ensuring that the coffee shop is financially sound and it achieves its set objectives. He holds a degree in accounting. Furthermore, he has extensive experience in project management, budgeting, and executive management. He also has a proven record of accomplishment in leadership in having heading various organizations, where his strategic planning skills were evident.
  • The chief operating officer, John, will be responsible for the daily operations of the coffee shop, including overseeing the operations of the other managers and other key persons. He will report to the president of the company directly. The COO will offer direction to all the other staff within the outlet. John holds a bachelor’s degree in hotel management. He has also pursued various professional courses related to the field. Besides, he has extensive experience in hotel management, having worked in some of the leading hotels in the region. He is an expert in budgeting and cost control; thus, his services will be vital for the success of the firm.
  • The marketing manager is responsible for all the marketing, advertising, and promotional activities of the company. Alicia will serve as the marketing manager for the coffee shop. She will be managing the marketing aspect of the company, including all the activities of the marketing department. Besides, she will be responsible for develop the company’s marketing strategy, which will be in line with thee corporate objectives. Alicia holds extensive experience in marketing, having worked for some of the most popular marketing firms in the country. She has offered leadership in multiple marketing campaigns where her experience and skills have led to the success these campaigns.
  • The food and beverage manager (F&B) is in charge of the kitchen and the restaurant. He will oversee the operations of all the subordinate staff in these departments. He will be instrumental in the making of the menu and the layout of the restaurant. Furthermore, he will ensure that aspects such as food presentation are superior so that the coffee outlet can have an added advantage when compared to the competing firms. John will lead the department. Doe has an experience of over five years in F&B management. He is a graduate of one of the leading culinary schools in the country. Previously, he served as the F&B manager for various Marriot International Hotels where he gained extensive experience in different areas.
  • The accounts/ finance department manager will be in charge of all the financial aspects of the company, including bookkeeping, cashiers, payroll, and petty cash management. The manager will also be responsible for cost accounting to ensure that the operations of the coffee shop align with the corporate goals. Furthermore, he will offer advisory services to the president and other managers to ensure that the company adheres to the laws and professional accounting standards. Alicia will head the department. She holds a Bachelor’s degree in accounting and is a member of AICPA. Additionally, she has worked in the finance / accounting departments for various organizations, including in the hospitality industry.

Advisory Board

            An advisory board comprised of experienced professionals from different fields. These members will have experience in different areas including marketing in the hospitality industry, accounting, food costing, and human resource management. The board will offer advisory services to the president and the other managers. Additionally, the board will hold monthly meetings or when called upon, and their fees will be based on the number of meetings that they hold within a given month.

Conclusion

            The various considerations reveal that the business is likely to succeed. Java Coffee Shop will have a unique concept, which will include a wide selection of specialty coffee and accompaniments in an ambient environment, but with competitive prices. The coffee shop will target young professionals, students, and tourists within the area. Furthermore, the management and senior leadership will comprise of individuals who have expansive experience in the food and beverage industries, and other business areas relevant for the success of a company such as marketing. Furthermore, the marketing plan includes a variety of activities that many of the other coffee shops within the area are yet to implement. The financial plan shows that the company may break-even during the fifth year of operation. Therefore, presenting the required funding presents a unique opportunity for one to gain returns within five years considering the Java Coffee Shop has high chances of succeeding, which will be followed by expansion by replicating the success in other areas.

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 References

Baskerville, P. (2014, March 13). What’s The Secret To A Successful Coffee Shop? Retrieved from https://www.forbes.com/sites/quora/2012/12/20/whats-the-secret-to-a-successful-coffee-shop/

Gaille, B. (2017, May 21). 27 Coffee Shop Industry Statistics and Trends. Retrieved from https://brandongaille.com/25-coffee-shop-industry-statistics-and-trends/

Grullon, Y. (2018, August 1). The True Cost of Opening a Coffee Shop. Retrieved from https://www.shopkeep.com/blog/how-much-does-it-cost-to-open-a-coffee-shop#step-1

Khan, M. A. M. (2017). Seminar Paper on Sole Proprietorship Business (Doctoral dissertation, Bangabandhu Sheikh Mujibur Rahman Science and Technology University).

Marks, G. (2019, May 30). How Does That Independent Coffee Shop Survive? Retrieved from https://www.entrepreneur.com/article/334463

Sherman, A. (2015, June 8). A Small-Business Guide to Common Sources of Capital. Retrieved from https://www.americanexpress.com/en-us/business/trends-and-insights/articles/small-business-guide-sources-of-capital/

Treyger, V. (2019, May 30). 6 Ways to Market Your Small Business for Less Than $100. Retrieved from https://www.entrepreneur.com/slideshow/299864

Tuten, T. L., & Solomon, M. R. (2017). Social media marketing. Thousand Oaks, CA: Sage.

Ward, S. (2017, August 15). Dreaming of Starting Your Own Coffee Shop? Here’s How to Do It. Retrieved from https://www.thebalancesmb.com/how-to-start-a-profitable-coffee-shop-4147028